working paper series · helena m. m. lastres (redesist, institute of economics, federal university...
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GLOBELICS
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Working Paper Series
No. 08-02
ISBN: 978-970-701-963-8
Discussing innovation and development: Converging points between the Latin American school and the
Innovation Systems perspective?
By
José E. Cassiolato Helena M. M. Lastres
The Global Network for Economics of Learning, Innovation, and Competence Building System
www.globelics.org
GLOBELICS
Discussing innovation and development: Converging points between the Latin American school and the
Innovation Systems perspective?1
José E. Cassiolato (RedeSist, Institute of Economics, Federal University of Rio de Janeiro, Brazil)
Helena M. M. Lastres (RedeSist, Institute of Economics, Federal University of Rio de Janeiro, Brazil)
1 This paper is based on Cassiolato et al (2005) and Cassiolato et al (2006).
“One cannot confuse the pondered knowledge of what is from the other with a mental submission
to their ideas, submission that we are very slowly learning to get rid of”.
Raul Prebisch
1 - Introduction
From the 1950s to the 1970s the central preoccupations of the international research and
policy agenda was to come to terms with underdevelopment. During this period a
theoretical framework– structuralism - shaped the debate on the issue. There are many
differences within structuralism, but its contributors share the view that underdeveloped
countries are significantly different from industrial advanced ones. Hence they could not
follow the same “paths” towards development) Some authors even went beyond that
arguing that structural inequalities in international economic and geo-political relations
were the main causes of underdevelopment. Other consensual points of these writers
were the understanding that (i) structural changes and specific knowledge and policies
were necessary to overcome backwardness and (ii) that structural changes would require
government intervention. rely
The emphasis of the agenda changed dramatically in the late 1970s as a crisis – which
combined stagnation, inflation and unemployment - started in developed countries and
spread throughout the world. This had a parallel with the diffusion of orthodox monetary-
based thinking, which became the hegemonic paradigm throughout the 1980s and 1990s.
However, significant difficulties remained in understanding the nature of the crisis, the
specificities of the IT revolution and the acceleration of globalization, as well as in
conceptualizing the problems and in formulating policy prescriptions to cope with it
One of the most fruitful alternative thinking developed in advanced countries came from
a resurrection and updating of earlier thinking that emphasized the role of innovation as
an engine of economic growth and the long-run cyclical character of technical change.
Christopher Freeman‟s now famous paper of 1982 pointed out the importance that Smith,
Marx and Schumpeter attached to innovation (p. 1) and accentuated its systemic and
national character (p. 18). He also stressed the crucial role of government policies to cope
with the uncertainties associated with the upsurge of a new techno-economic paradigm
and the very limited circumstances under which free trade could promote economic
development.
In the South, neo-liberalism had a negative impact on the previous structuralism
consensus. The leading proponents of what Toye (1987) has called the 'counter-
revolution in development theory and policy' introduced a radical neo-liberal agenda in
which “development practically disappears as a specific question (remaining) only as the
welfare achieved by the elimination of obstacles to market functioning” (Arocena and
Sutz 2005, p. 16). This agenda stated that long-run growth should be maximized through
the pursuit of short-run allocative efficiency as determined by market prices; and that
even if market failures existed, imperfect markets were better than imperfect states.
The basic neo-liberal principle has been that underdevelopment is simply the result of
bad allocation of resources and that is virtually exclusively caused by government
intervention (with the proliferation of controls that distort prices and the existence of an
over-dimensioned public sector) and reduced the complex problem of underdevelopment
to a matter of simply following some simple economic “recipes” (get the prices right, get
the property rights right, get the institutions right, get the governance right, get the
competitiveness right) based on replicating Anglo-American institutions throughout the
world and orthodox textbook ideas about liberalization of international trade and
investment, privatization, and deregulation (Chang 2005).
By proposing a world where countries would converge if they followed the same
liberalizing economic recipes and using their economic and political power to influence
government and intellectuals, international organizations forced a radical shift in the
nature of the debate. One of the most significant by-products of these views was that
previous theorizing about development and underdevelopment coming from Latin
America was almost totally discarded as a frame of reference for understanding and
changing the world. Another consequence, perhaps more disturbing, is that 25 years of
neo-liberal experimentation with economic policies led to a more divided world, with the
gap between rich and poor countries (and people inside countries) widening and poverty
and starvation increasing.
Since it was formulated in the 1980s, the Systems of Innovation approach has been
increasingly used in different parts of world to analyze processes of acquisition, use and
diffusion of innovations and to guide policy recommendations. This is also true in Latin
American countries, where it is being applied and understood in close connection with
the basic conceptual ideas of the structuralism approach developed in the region since the
1950s under the influence of the Economic Commission of Latin America and Caribbean.
In fact, since the mid-nineties, the work of RedeSist – the Research Network on Local
Productive and Innovative Systems – based at the Economics Institute of Rio de Janeiro,
Brazil - has been using such dual frame of reference.
Stemming from the research program of RedeSist, this paper aims at (1) identifying and
discussing common aspects, as well as main differences between both approaches; and
(2) exploring the advantages of linking these approaches particularly, but not exclusively,
in the case of development.
The importance of examining convergences between these frameworks is three fold.
First, it contributes to a deeper reflection on the use of the concept of innovation systems
in understanding and orienting the processes of innovation and capacity building in less
developed countries. Second, we argue that both approaches can benefit a lot from
incorporating contributions from each other. Finally, this effort of discussing conceptual
coherence may even provide ground to identify convergences when comparing analytical
and normative frameworks to be used in national systems of innovation and in
development studies not only in the Americas but also in Africa, Asia, Oceania and
Europe.
2 - The evolution of the Latin American Structuralism Approach –
LASA
LASA is essentially an analytical body concerned with an historical account of systems
of political economy, It firstly examined the middle and long-term trends in the social
and economic evolution of the region, particularly through the contributions of Raúl
Prebisch (1949a and 1949b) and Celso Furtado (1958, 1961). The theory departed from a
diagnosis of the deep transition Latin American underdeveloped countries went through
from commodity export based growth (crescimiento hacia afuera) to a model where
manufacturing and urbanization started to play a larger role (crescimiento hacia adentro)
especially in larger countries such as Argentina, Brazil and Mexico. The approach relied
on a method that emphasized the behavior of social agents and the trajectory of
institutions.
Another fundamental point of LASA‟s frame of reference is the proposal that
“underdevelopment is ... an autonomous historical process, and not stages that,
economies that already achieved a superior degree of development have necessarily to go
through” (Furtado 1961, p. 180). In other words, is not possible to understand
underdevelopment conditions as if peripheral countries would follow the same “historical
steps” of developed countries nor development could not be understood as an universal
process; but, on the contrary a historical specific process of each country.
As it is neither linear nor sequential, development is a unique process and depends on
several aspects related to political, economic, historic and cultural specificities that occur
from long-run structural changes that generate ruptures with historically established
patterns. Both theory and policy recommendations are highly dependent on each
particular context. Notwithstanding the power of its analytical tools, one cannot easily
find references to this line of thinking at the body of history of economic theories.
(Bielschowsky 2000)
3. The importance of the innovation systems perspective for less
developed countries
The innovation systems (IS) perspective departed from Schumpeter and has evolved
through the incorporation of other contributions and evidence from empirical work.
Particularly relevant is that since the beginning of the 1970s, the innovation concept has
been widened, to be understood as a systemic, non-linear process rather than an isolated
fact. Emphasis was given to its interactive character and to the importance of (and
complementarities between) incremental and radical, technical and organizational
innovations and their different and simultaneous sources.
A corollary of this argument is the specific and localized character of innovation and
knowledge. A proposition by Nelson (1993) that innovation should then be understood as
the process by which firms master and implement the design and production of goods and
services that are new to them, irrespective of whether or not they are new to their
competitors – domestic or foreign is particularly important for the analysis of innovation
in less developed countries. The firm was re-conceptualized as an organization embedded
within a broader socio-economic–political environment reflecting historical and cultural
trajectories. This understanding helps to avoid an overemphasis on R&D in the
innovation process, encouraging policy-makers to take a broader perspective on the
opportunities for learning and innovation in small and medium-sized enterprises and in
the so-called traditional industries (Mytelka and Farinelli, 2003).
This focus on the localized (and national) nature of the generation, assimilation and
diffusion of innovation is on opposition to the idea of a supposed techno-globalism. This
understanding of innovation as a localized, context specific and socially determined
process implies, for instance, that acquisition of technology abroad is not a substitute for
local efforts. On the contrary, one needs a lot of knowledge to be able to interpret
information, select, buy (or copy), transform and internalize technology.
Systems of innovation, defined as a set of different institutions that contribute to the
development of the innovation and learning capacity of a country, region, economic
sector or locality, comprises a series of elements and relations that relate production,
assimilation, use and diffusion of knowledge. In other words, innovative performance
depends not only on firms and R&D organizations performance but also on how they
interact, among them and other agents, as well as all the other forms by which they
acquire, use and diffuse knowledge. Innovation capacity derives, therefore, from the
confluence of social, political, institutional, and cultural specific factors and from the
environment in which economic agents operate. Different development trajectories
contribute to shape systems of innovation with quite diverse characteristics requiring
specific policy support
It is this understanding of the systemic nature of innovation that allows for two crucial
dimensions of the innovation systems approach to be explicitly discussed: the emphasis
on historical and national trajectories and the importance of taking into account the
productive, financial, social, institutional and political contexts, as well as micro, meso
and macro spheres (Freeman, 2003; Lastres, Cassiolato and Maciel 2003).
Although all of these contexts are relevant for a discussion about development, two in
particular should be singled out that are pertinent to this paper. One is the financial
context, recognized by Schumpeter (1912) in his Theory of Economic Development. For
him entrepreneurs, to become the driving force in a process of innovation, they must be
able to convince banks to provide the credit to finance innovation. In this sense, any
discussion about innovation systems has to include the financial dimension.2 The other is
the idea that space matters, that analyzing systems of innovation should be done at the
national (Freeman 1982 and Lundvall 1988) and local levels (Cassiolato, Lastres and
Maciel 2003).
The concept of national innovation systems was introduced by Christopher Freeman (1982,
1987) and Bengt-Ake Lundvall (1985, 1988). Since the beginning of the nineties this
concept has been used as an analytical tool and as a framework for policy analysis in both
developed and underdeveloped countries. As a result, research and policy activities
explicitly focusing on systems of innovation can be found in most countries and a rapidly
growing number of studies of specific national systems of innovation have been produced.
Although some authors tend to focus on the innovation system in a narrow sense, with an
emphasis on research and development - R&D - efforts and science and technology -
S&T – organizations, a broader understanding of national innovation systems (Freeman,
1987; Lundvall, 1985) is more appropriate. This approach takes into account not only the
role of firms, education and research organizations and S&T&I policies, but includes
government policies as a whole, financing organizations, and other actors and elements
that influence the acquisition, use and diffusion of innovations. In this case emphasis is
also put on the role of historical processes - which account for differences in socio-
economic capabilities and for different development trajectories and institutional evolution
- creating systems of innovation with very specific local features and dynamics. Therefore,
the stress on the importance of the national character of systems of innovation.3
2 See for instance Mytelka and Farinelli 2003; Freeman, 2003; Chesnais and Sauviat, 2003.
3 It is worth mentioning that, already in the first paper introducing the concept, written as a contribution to
the „OECD Expert Group on Science, Technology and Competitiveness‟, which met during 1980-1983,
Figure 1, below is an attempt to show both the narrow and the broad perspectives on
national innovation systems. The broad perspective includes different, connecting
subsystems that are influenced by various contexts: geopolitical, cultural, social, political,
economic, local and so on. First there is a production and innovation sub-system which
contemplates the structure of economic activities, their sectoral distribution, degree of
informality and spatial and size distribution, the level and quality of employment, the
type and quality of innovative effort. Second there is a sub-system of capacity-building,
research & technological services which considers. education (basic, technical,
undergraduate and postgraduate), R&D, training and capacity-building, S&T information,
metrology, consulting, intellectual property. Third, there is a policy, representation and
financing sub-system which takes into account explicit policies (S&T&I, industrial,
sectoral) and implicit policies (macroeconomic, investment, trade, etc.), regulation
(sectoral, foreign trade, intellectual property, environment, innovation), promotion,
financing and representation. Finally, there is the role of demand, which most of the
times is surprisingly absent most analyses of innovation systems. This dimension
includes pattern of income distribution, structure of consumption, social organization and
social demand (basic infra-structure, health, education).
Figure 1- The Narrow and the Broad Perspectives on National Innovation Systems
Freeman (1982) argued not only that the performance of countries were tied to innovation but, most
important, that factors beyond the realm of R&D and S&T organizations influenced significantly
innovation performance of firms and countries, pointing out the national nature of these factors. Later on he
specifically used the broad concept of NIS in the analysis of the Japanese economic and technological
performance from the 1950s to the 1980s (Freeman, 1987).
This portrayal of the national innovation system framework is a corollary of an
understanding that,
innovation capacity derives from the confluence of economic, social, political,
institutional and cultural specific factors and from the environment in which they
operate, implying the need for an analytical framework broader than that offered
by traditional economics (Freeman, 1982, 1987; Lundvall, 1985);
the number of firms or organizations such as universities and research institutes is
far less important than the habits and practices of such actors with respect to
learning, linkage formation and investment. These shape the nature and
extensiveness of their interactions and their propensity to innovate (Johnson,
1998; Mytelka, 2000, Johnson & Lundvall, 2003);
main elements of knowledge are embodied in minds and bodies of agents or
embedded in routines of firms and in relationships between firms and
organizations. Therefore, they are localized and not easily transferred from one
place/context to another, for it is something more than information and includes
tacit elements (Polanyi, 1966; Lundvall, 1985);
the focus on interactive learning and on the localized nature of the generation,
assimilation and diffusion of innovation is in opposition to the idea of a supposed
techno-globalism (Freeman, 1995). The understanding of innovation as a context
specific process implies that the acquisition of foreign technology abroad is not a
substitute for local efforts (Cassiolato & Lastres, 1999);
national framework matters, as development trajectories contribute to shape
specific systems of innovation. The diversity of NISs is a product of different
combinations of their main features that characterize their micro, meso and
macroeconomic levels, as well as the articulations among these levels (Freeman,
1987, 1999; Lastres, 1994).
From the specific point of view of less developed countries (LDCs) the usefulness of the
IS approach resides precisely in the facts that (i) its central building blocks allow for their
socio-economic and political specificities to be taken into account and (ii) it does not
ignore the power relations in discussing innovation and knowledge accumulation.
4 – Connecting the innovation systems perspective with the Latin
American Structuralist Approach (LASA)
LASA acknowledges the central role of innovation, learning and capacity building on
development processes. It is based on a systemic and global perspective regarding the
“peripheral condition” and the growth restrictions in less developed countries. Therefore,
the dynamics of local productive and innovation systems are seen as dependent on their
international insertion. Additionally, and as the analyses of economic phenomena also
takes into consideration their social, political and historical complexity, policy
prescriptions are based on the assumption that the process of development is influenced
by and reflects the particular environment of each country, rather than to
recommendations based on the reality of advanced countries.
The innovation systems literature also explicitly recognizes that some of its most
important conceptual pillars are rooted in the development discussion. For example
Johnson et all (2003) in a paper that links the system of innovation approach with
development point out that the innovation system perspective was inspired by ideas
“concerning the interdependence between different sectors from Hirschman (1958) …
(and)…of positive and negative feedback, of cumulative causation, of virtuous and
vicious circles and of the importance of institutions from Myrdal (1968)” (p. 2).
In fact, the role of technology was an important part of the post-war debate on
development. Schumpeter‟s (1934; 1950) concept of development contributed two central
ideas to this debate. One, of course, was connecting technology with production
generating new products, new processes or the establishment of new markets. The other
was the emphasis on the disruptive character of development. These two notions shaped
subsequent contributions, particularly in the UN, of Prebisch‟s (1949), Singer‟s (1950)
and Myrdal‟s (1958) analyses of the long-term deterioration of terms of trade for primary
products and of the distribution of gains between developed and developing countries.
Their joint work constituted what became known as the „triple alliance‟ on the discussion
of terms of trade, as all of them took important part in the setting up of the UN.4
A number of development studies followed these ideas, arguing that technical change
plays a central role in explaining the evolution of capitalism and in determining the
historical process through which hierarchies of regions and countries are formed. Furtado
(1961), for instance, established an express relation between economic development and
technological change pointing out that the growth of an economy was based on the
accumulation of knowledge and understood development within a systemic, historically
determined, view. Although original these contributions have a close correspondence
with Myrdal‟s (1958) proposition that (i) contexts and institutions matter; (ii) positive and
negative feedbacks have cumulative causation; (iii) cycles may be virtuous or vicious and
4 Prebisch became Executive Secretary of the UN Economic Commission for Latin America, Myrdal
became Executive Secretary of the UN Economic Commission for Europe and Singer joined in 1947 the
Economics Department of the UN on a provisional assignment that lasted 22 years. For details see Sapsford
& Chen (1999).
with Hirschman‟s (1958) point that interdependencies among different activities are
important.5
A significant development resulted from the joint effort of Chris Freeman at the Science
Policy Research Unit and Hans Singer at the Institute of Development Studies at the
University of Sussex, in the late 1960s. The contributions combined the discussions on
poverty, self-reliance and the role of science and technology. The synthesis of this
endeavor is the Sussex Manifesto (Singer et al., 1970), prepared for the debates of the UN
Second Development Decade of the 1970s by Singer, Freeman, Cooper, Oldham and
others. This document observed that less than 10 percent of global R&D took place in the
less developed world. Its main proposition was that developing countries should have
their own scientific and technological capability not only for increasing production, but,
more importantly, for improving the capacity to produce.
These efforts set off important associated work on “appropriateness” of technologies,
employment and basic needs heavily focusing on inclusion and exclusion, equity and
development (not just growth) and learning and capabilities as fundamental issues
regarding technological development. On the employment question, the technology and
development issue became connected with the Keynesian idea that the main assets of a
country are its human resources and with Edith Penrose‟s concept that the firm is a
collection of capabilities that are embodied in human beings.
In fact, in the same period (1970s and 1980s), authors inspired by the Latin-American
Structuralist literature, developed a number of firm level studies on technology and
development where the second of Schumpeter‟s ideas – the disruptive character of
development – was taken into account. This work was instrumental in showing, not only
successful stories of technological up-grading, but also important limitations of
traditional approaches to technology and development; precisely because they do not
consider key elements, such as the role of institutions, of the macroeconomic regime and
of power conflicts.
Crucial in this line was a series of studies undertaken under the sponsorship of the
Canadian International Development Research Council in the 1970s, the S&T Policy
5 For details see Cassiolato, Lastres, Mytelka and Lundvall. (2005).
Instruments project (Sagasti, 1978). This research revealed a key element to the
understanding of innovation and technology in the region: the finding that implicit
policies (general economic, industrial and trade policies) had a much deeper effect in
innovation strategies by firms than explicit ones. It suggested that implicit policies not
only did not contribute to fostering internal technological development by firms but, most
importantly, inhibited them (Herrera, 1981, Erber 1983). This work also pointed out that
by concentrating on learning processes within the firm, the technological capabilities
literature ignored external economies associated to the capacity to generate innovations.
The need to address paradigmatic changes and the problems and options deriving from
the upsurge of the information technologies led to the upsurge in Latin America in the
1980s of a series of interconnected work from the innovation perspective. Building on
Furtado‟s work on changes associated with the industrial revolution (Furtado, 1958)
authors like Herrera (1975) and Perez (1983) analyzed the opportunities and challenges
associated to the introduction of these radical changes in the region.
It was only then that the innovation and development literature started to integrate the
empirically validated knowledge about learning inside firms with the contributions
stemming from the work of Freeman, Perez, Herrera and others on new technologies,
changes of techno-economic paradigm and systems of innovation. What gave special
impetus on this direction was the empirical work focusing on technological capability
building as part of a broader national innovation system. The role of government policies
in orienting the speed and direction of technological changes was also highlighted
(Freeman and Perez, 1988).
The convergence between the Latin American structuralist school and the innovation
systems perspective is not surprising as the conceptual underpinnings of both schools rely
on the same solid ground: Schumpeter, List, Marx and previous scholars of the
Renaissance tradition (Serra 1618) that focused their analysis of the economic and social
processes on production and knowledge. This tradition suggests that wealth originates
from immaterial forces (creativity and knowledge) and that the accumulation of assets
occurs through the incorporation of new technologies and innovation. This approach is
totally different from the classical school and the phisiocrats that understands these
processes on a mechanistic and barter-centered way (Reinnert 1999).
It is from this initial emphasis on knowledge accumulation and on the associated
increasing returns that one may describe positive mechanisms of self-reinforcement
leading to virtuous cycles of development in a national economy. Then, both approaches
recognize first that development processes are characterized by deep changes at the
economical and social structure. In other words, development takes place from
(technological and/or productive) discontinuities that cause and are caused by productive,
social, political and institutional structure of each nation.
Second, development is also a systemic process. According to Fiori (2001), the most
original contribution from the LASA has been its systemic perspective about the unequal
world capitalism development, claiming that the world economic system is hierarchic.
This intrinsic characteristic of capitalism got underway with the unfolding of the
industrial revolution. European countries in the 19th century and US during the 20th
century had the power to impose technological, commercial and developmental patterns
that promoted inequalities and created a hierarchy in the world system that originated the
systemic periphery (underdeveloped countries).
The systemic character comes also straight from Schumpeter‟s idea of a dynamic system,
with the role of „historical increasing returns‟; the systemic evolution of capitalism
produces an uneven distribution of the gains from technical change, creating, on the one
hand, systemic economic development, and causing, on the other hand,
underdevelopment.
Third, there is also the recognition of a national specificity of these processes. We could
find in Furtado, the same stress on the national character of development processes that
was found in List (1856) and also in Freeman (1982) and Lundvall (1988) when they
stress the idea of national innovation system.6 Furtado (1961) discusses the
transformation of “national economies where its structural complexity is manifested on a
diversity of social and economic forms. For Furtado, it is in this transformation that lies
the very essence of development: structural changes “in the internal relations of the
economic and social system” (p. 103), that are triggered by capital accumulation and
technological innovations.
6 For details see Lastres, 1994.
Both schools also deny any idea of a general equilibrium. Competition in the capitalism
system is an active dynamic process of creation and destruction of economic
opportunities rather than an adjustment towards an imaginary equilibrium. Therefore,
innovation, discontinuities and uncertainty are the main factors that contribute to the
dynamic of capitalist accumulation through time. Technical asymmetries between core
and periphery, deterioration of international trade exchange, structural debilities are all
elements that are not compatible with any tendency towards equilibrium.
The emphasis on diversity, and the recognition that (a) both theory and policy
recommendations are highly context dependent, (b) the economy is firmly embedded in
society and (c) knowledge and technology are context-specific, conform some general
identities of the two approaches that are rooted on older traditions. In what follows we
propose to detail five common aspects between the IS literature and the LASA: the
relevance of technical progress (innovation) to development process; the preeminence of
non-economic factors, asymmetries in (and the dual character of) the international
economical and technological process of development, learning asymmetries and the
specific importance of policy for structural change.
4.1. The relevance of technical progress (innovation) to development
processes
Both LASA and IS approaches argue that structural change triggered by technical
progress (innovation) is the main determinant of development. The significance the IS
framework gives to innovation is well known. Joseph Schumpeter (1911) already
emphasized the need to understand the relationship between technical innovation and the
long-term economic development cycle. His contributions have been used by many
authors that intend to explain the dynamics of capitalism through a endogenous analyses
of the technical progress.7 Productive, technological, organization and institutional
changes are important outcomes of the innovative process as an instrument of long-term
development.
7Cassiolato and Schmitz (1992) .
As for LASA, Furtado (1961) established a direct relation between economic
development and technological innovation pointing out that the growth of an advanced
economy was based on the accumulation of new scientific knowledge and on the
application of such knowledge to solve practical problems. The Industrial Revolution set
into motion a process of radical changes based on technical progress that lasts till now
and that is at the roots of how the world economy is conformed. In essence, those
changes: (i) rendered endogenous the causal factors related to growth into the economic
system; (ii) made possible a closer articulation between capital formation and the
experimental science. Such articulation has turned to be one of the most fundamental
characteristics of modern civilization. As pointed out by Furtado (1961), the beginning
of such process took place at the countries that were able to industrialize and create
technical progress first, and the quick accumulation made possible in the development of
this process became the basic engine of the capitalist system. For this reason, there is a
close interdependency between the evolution of the technology in the industrialized
countries and the historical conditions on what such development was made possible.
4.2 The preeminence of non-economic factors
Among the main efforts of the LASA is the attempt to stress the importance the non-
economic factors on the evolution and performance of countries and national economies.
As the behavior of the economic variables rely on those parameters - that are defined and
evolve into a specific historical context - it is quite difficult to isolate the study of
economic phenomena from its historical frame of reference (Furtado 2002). This
assertion is more significant when analyzing economic, social and technological systems
that are different from each other, as in the underdeveloped economies.
At this point there is to be noted an important differentiation of LASA with the French
structuralist school particularly about the role – for analyzing development - of historical
processes, of the social reality and the need to deepen “the understanding of the behavior
of economic agents, departing from precisely defined contexts” (Furtado 1961 p. 98). In
this perspective, it is necessary to take into consideration the behavior of social agents as
well as trajectories of institutions. In these two pillars rest the essential fundamentals of
the theoretical construction of the structuralism comparative historical analyses:
peripheral Latin American underdeveloped structures conduct more than determine
specific behavior trajectories that, a priori, are unknown. Development process under
peripheral conditions is different due to its historical movement that is singular to its
specific experiences. In this context, “underdevelopment” may not, and should not, be
considered as an anomaly or simply a backward state. Underdevelopment may be
identified as a functioning pattern and specific evolution of some economies. Social and
economical peripheral structure determines a specific manner under which structural
change occur (industrialization during the 1950s and 1960s) and technical progress is
introduced. Hence different outcomes from those happened in developed countries are to
be expected (Furtado, 1961; Bielschowsky, 2000; Rodriguez, 2001).
Perhaps the most important point concerning the neo-schumpeterian perspective is that
economic development is considered as a systemic phenomenon, generated and sustained
not only by inter-firms relations, but most significant by a complex inter-institutional
network relations. Innovation is eminently “social process” (Freeman 1995). Therefore,
development – resulted form the introduction and diffusion of new technologies – may be
considered as the outcome of cumulative trajectories historically built-up according to
institutional specificities and specialization patterns inherent to a determined country,
region or sector.
In the same way, the IS approach, in convergence with LASA, understands that
development processes cannot be understood as if economical history of all countries
followed the same development trajectory. Firstly, it recognizes that each country traces
its own development trajectory according to its specificities and possibilities. Secondly, it
also recognizes that the evolution of national (and regional) economic systems depend
fundamentally on their hierarchical and power position into the world capitalist system.
At last, it is important to mention that differently from the standardization and
convergence that globalization theories suggest, the IS perspective and LASA point out
that local and national conditions lead to different trajectories and rising diversities in the
national and sub-national systems (Furtado 1998, Cassiolato and Lastres, 2000, 2002;
Lastres, Cassiolato and Arroio, 2005).
4.3. Asymmetries in and the dual character of the International economic
and technological development
In this section, we explore LASA and IS convergence on the argument that those nations
that were able to obtain a better position in the “innovative race” tend to be more
dynamic and competitive than others, reaching better social and economic performance,
and consequently, more geo-political power. Thereupon, division lines had been
established between those that are capable to promote or directly participate in the
innovative and development processes and those kept out.
Fiori (2001), suggests that LASA presents a strong Schumpeterian inclination, given the
role played by innovation and technological diffusion in explaining the evolution of the
capitalism history and in the determination of this historical process of hierarchy
formation of regions and countries. According to Prebisch (1949), the industrial core was
formed from the irregular and slow diffusion of the technical progress, where just a small
sum of the world population were benefited by those new forms of production. Therefore,
around this core was formed the periphery of the capitalist system. The “coexistence of a
centre, commanding technological development, and of a vast and heterogeneous
periphery marginal to the system is on the basis of the income concentration at the world
level. This is an important point since it discards any idea of development as a “catch-up”
process with backward countries followings the steps of the development of advanced
countries. According to Furtado, “Presbisch‟s view implies that there is not an inevitable
trend towards a passage from any given stage of progress to another supposedly
superior”. (Furtado 1961, p. 153).
It follows that the main formulations of Presbisch and LASA school converge with the
innovation system perspective in a point normally ignored by the literature: the
“dualization” of the capitalist system, the idea that the evolution of the system creates at
the same time systemic and virtuous development and vicious underdevelopment.
Although normally associated only the LASA school some authors (Reinert 1999,
Myrdal 1968) argue convincingly that this dualization of the world economy after the
advent of the industrial revolution is at the core of Schumpeter‟s dynamic system, when
he points out the role of „historical increasing returns‟. In this direction Schumpeter
analysis retains the characteristics of other authors of the German school of a system
which produces uneven growth and an unequal distribution of the gains from technical
progress, with internal and external roots He proposes that two key mechanisms which
create uneven distribution of the gains from technical change: (i) extremely uneven
advance of the „technological frontier‟ concentrated on the “centre”, and (ii) collusive
form of distribution of the gains from technical change, “because the forces of the
producing country (capital, labor, and government) in practice - although not as a
conspiracy - „collude‟ to appropriate these gains” (Reinert 1999). These asymmetries
have important geo-political connotations, and occur with developed countries
concentrating in advances in the technological frontier - specializing in the production
and distribution of sophisticated goods and services - - and underdeveloped in those
characterized by lower productivity. Myrdal, in a clearly structuralism fashion, indicates
that a corollary of the virtuous circles of development are the vicious circles of
underdevelopment and the perverse effects on the world economy.
Intensive knowledge-based activities proportionate the domination, generation and use of
innovation consolidating and maintaining strategic and leadership positions. Contrarily,
less intensive knowledge-based activities tend to be devalued and just considered when
only costs are taking into consideration. In other words, those activities are related to the
“spurious competitiveness”, based on lower wage rates, fiscal incentives, natural
endowments exploitation, environmental degradation, etc. International division of labour
is then characterized by the concentration of intensive knowledge-based activities in the
core countries, and less intensive knowledge-based activities in peripheral countries.
Both structuralist and neo-schumpeterian authors claim that international division of
labour have as consequence the maintenance and enlargement of development and
knowledge gap among nations. Those gaps are even widened by high-priced and
technological intensive goods and services export from developed countries, while
underdeveloped ones are restricted to an obsolete non-competitive pattern of production
and exportation.
Hence the LASA vision suggesting that the rupture with a pattern of specialization based
on the production and exports of primary goods could only be overcome with the
incorporation in the region of the benefits of the second industrial revolution. In this
sense the emphasis on industrialization as the propelling element of development in the
region given by authors such as Furtado and Presbisch is precisely the same given to the
new information technologies by neo-schumpeterians of the system of innovation
approach.
In the IS perspective, Freeman (1988) argues in the same direction when arguing that that
the time lag between innovators and imitators is positively related to the support of
innovation by leading countries, and to the fragility of the necessary conditions to
innovate by the imitators countries. According to him those “technological asymmetries”
are simultaneously a barrier to the accessibility to new technologies and an incentive for
those who lead technological process to innovate. Even more, historical and international
asymmetries between core and periphery tend to last and accentuate. Furthermore, for
both schools worse than technological asymmetries are learning and knowledge
asymmetries, which make impossible to access, comprehend, use and diffuse the new
knowledge.
4.4 Learning asymmetries
In the IS perspective the process of dualization between nations would not be nurtured
only by the technological gap, but mostly by the difficulties in assessing information and
knowledge and by the constant magnification of the technological frontier. The more
distant underdeveloped countries are from the technological frontier the larger will be the
barriers to an innovative insertion in the new technological paradigm.
Hence, more serious than technological asymmetries are knowledge and learning
asymmetries, with the implication that access, understand, absorb, dominate, use and
diffuse knowledge turns to be impossible. However, even when the access to new
technologies becomes possible, most of the times they are not adequate to the reality of
underdeveloped countries and/or these countries do not have a pool of sufficient
knowledge to make an adequate use of them. This occurs because the learning process
depends on the existence of innovative and productive capabilities that not always are
available. On this aspect, Arocena and Sutz (2003) argue that there are clearly learning
divides between North and South that are perhaps the main problem of underdevelopment
nowadays.
In a complementary fashion, Tavares (1972, p.50) points out that “underdeveloped
countries import a kind of technology that were conceived by leading economies
according to a constellation of resources that is totally different from ours. The need to
import this technology was given by the very substitutive character of industrialization
and by the impossibility of creating new techniques more adequate to our own
conditions”.
The importance of the knowledge and learning gap was already mentioned by Prebisch in
1949. For him the problem of productivity in peripheral countries, more than being linked
to the scarcity of savings to investments in technology and capital goods, is related to the
“capacity of men that know to use efficiently these goods in the different phases of the
production process” (Prebisch 1949a). In this sense he recognizes the importance of
knowledge and capacity-building for development.:
“here we are confronted, once more, with another of the suggested
contrasts of the very unequal degree of development. In large developed
countries the ... aptitudes and abilities of workers developed
progressively, as production techniques evolved. Aptitudes, dexterity and
techniques were, in fact, the manifestation of the same general
phenomenon that ... was being prepared throughout centuries of artisan
work and of a growing development of the trade experience,” (Prebisch
1949a, apud Bielschowsky (2003, p.175)].
In his analysis of development and underdevelopment, Celso Furtado concluded that “it
is possible to industrialize and grow without breaking the structure of dependence and
domination that perpetuate underdevelopment” (Tavares, 2001). That is, “technological
innovations that seem to be more advantageous are those that approach cost and price
structures of (advanced0 countries and not those that allow for a speedier transformation
of the economic structure (of underdeveloped countries) by absorbing the subsistence
sector” (Furtado, 1961, p.192). The net result is a slow modification of productivity and
of the occupational structure of the underdeveloped country. In this sense, we understand
why, even with a high degree of industrial diversification, these countries are not capable
of shattering with the occupational pre-capitalist structure nor with the economic
domination they are inserted in.
4.5. The specific importance of policy for structural change
The presence of neo-liberal policies was very intense in the two last decades of the 20th
century in underdeveloped countries. The central target of these policies was the
elimination of any important role for State in fostering structural change. Policies and
institutions for development as designed by advanced countries and international
organizations are totally in contradiction with their own historical experience. no country
has developed its productive base without resorting to active industrial policy -.both
early industrialized and newly industrialized countries applied the same principle,
although to varying degrees and in different ways (Shafaeddin, 1998, Chang 2001).
Above we mentioned the importance both, LASA and IS give to the role of the State.
Here we point out the consideration they give to the role of policy in times of radical
change. The IS approach is particularly important to this discussion because it considers
that policies´ implementation are particularly relevant during the advent and diffusion of
a new techno-economic paradigm. For important authors in the IS perspective, such as
Freeman and Perez, development proceeds in long waves, the pivot of which lies in
technological revolutions. Thus it builds upon Schumpeter's theories of long cycles in
economic development and his exploration of 'creative gales of destruction'. This idea has
been developed further, initially for advanced countries (Freeman 1987, Perez 1983,
Freeman and Perez 1988) but also has been extended to LDCs (Perez 1985, 1988, 1989).
For them, changes in the 'techno-economic paradigm' (TEP) - pervasive changes with a
major influence on the behavior of the entire economy and society - are essential to
explain periods of economic growth and crisis. While fuelled by revolutionary
technological opportunities it takes time for a new paradigm to crystallize and even
longer for it to diffuse right through the economy. Crises are seen to arise when there is a
mismatch between the emerging new paradigm and the old institutional framework. The
State intervention is essential to internalize the benefits of the new paradigm and
minimize its costs.
LASA‟s stress on industrialization as a way to promote structural change and
development could be traced to Presbisch‟s (1949a) perception that after the 2nd world
war, the new hegemonic center and the Bretton Woods system were not favorable to the
development of the periphery and underdeveloped countries should pursue their own
paths. Hence his proposition of industrialization and endogenization of technical progress
as the most powerful tools for development and the need of policies to do so As already
mentioned Presbisch singles out technology as a factor which determines the existence of
two groups of countries. The need to overcome this disparity is at the heart of his
economic policy suggestions: the State should promote industrialization through which
technological advances could be absorbed. According to Bielschowsky (2003), Prebisch
justified protectionism stating that even if industrial production could be less effective in
the periphery as compared to the centre, it should be more efficient than agricultural
production. New investments should be led by the State, given the difficulties for capital
accumulation as a consequence of low levels of internal savings
Later on Furtado (1961) in his book “Development and Underdevelopment” included in
the policy agenda of LASA important questions such as how to deal with heterogeneity
and poverty since these were necessarily dealt with by tacking industrialization per se. By
incorporating these issues Furtado advanced LASA policy agenda towards topics that
were later brought by Perez which has included these issues in the IS perspective.
5 - Conclusions
In their paper to the Rio Globelics Conference, Reinert and Reinert (2003) warned about
the abuse of the IS perspective in academic and policy circles. They mentioned that “by
integrating some Schumpeterian variable to mainstream economics we may not arrive at
the root causes of development. We risk applying a thin Schumpeterian icing on what is
essentially a profoundly neoclassical way of thinking” (p. 63). Their point was that
development ideas and policy proposals that are spreading in the last few years are just
attempts to introduce the fashion around innovation and knowledge in frameworks of
analysis that still emphasize that: (i) both theory and policy recommendations are
independent of context, (ii) the economy is largely independent from society; and that
(iii) there is no distinction between real economy and financial economy.
The Reinerts paper warned about a worrisome trend of combining the IS perspective with
neo-classical economics. In other papers (Lastres and Cassiolato, 2004, 2005) we discuss
some of the important policy misunderstandings that are coming from such attempt. In
this paper we stress that a more fruitful combination lies in associating the IS approach
with LASA. The paper aimed at making explicit the connections between the IS
perspective and the Latin American Structuralism school in an attempt to specify its
analytical and normative corollaries. The discussion above shows, in the first place, that
there are significant convergences between them deriving mostly from common roots.
Secondly, it demonstrates that both lines of thought have already benefited from
incorporating contributions from each other, suggesting that this mutual interchange can
be amplified.
From an analytical point of view, the most important convergence are in
the emphasis to both production and innovation;
focus on the localized (and national) nature of the generation, assimilation and
diffusion of innovation;
observance of the systemic nature of innovation and the need of taking into account
the productive, financial, social, institutional and political spheres, as well as micro,
meso and macro dimensions.
Therefore the importance of knowledge not only about local, national and international
conditions but also about how local systems are “connected” to the global geo-political
and economic systems. In Brazil, we are using the main contributions of the IS
perspective with the pillars of Latin American Structuralist school as a conceptual base
for a better understanding of our industrial and technological development. This
combined approach has been used by RedeSist since 1997 to guide a research program on
local productive and innovative systems in Brazil and other Mercosul countries with both
empirical effort (aiming at examining learning and capacity building in local systems)
and policy recommendations. We believe that this combination of approaches have
provided, in the first place, useful and rich analytical and normative tools. This
experience has confirmed that both approaches can benefit a lot from incorporating
contributions from each other.
Arocena and Sutz (2003, 2005) note that, a „Southern framework of thought‟ is
fundamental to the analyses of development problems related to knowledge, innovation
and learning. This paper makes a contribution in that direction. By combining the
systems of innovation and the structuralist approaches we be believe that we have
achieved a perspective that is relevant to the study of innovation, learning and capacity-
building in the South. This allows to advance ideas that - contrary to the neo-classical
propositions - emphasize that:
economy agents and processes are embedded in social and political environment;
both theory and policy recommendations are highly context dependent;
constraints – internal and external - to development will always exist and should be
the central concern of policies..
Finally, we argue that that the SI approach can broaden and strengthen its role as a tool in
understanding and orienting the processes of innovation and capacity building by
exploring and assimilating its convergence with other analytical and normative
frameworks, and particularly those coming from the South. With such a combination it
may become useful in a wider set of cases and countries. This could provide novel
findings from empirical and comparative analysis and, therefore, could help to foster its
own development and refinement.
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